Walmart and class-action lawsuits

A Supreme Court ruling worth checking out

MONDAY'S Supreme Court decision in Dukes v Walmart (PDF) looks tailor-made to worry those who think the court has become too business-friendly. On one side was a mammoth corporation, little loved on the left. On the other, 1.5m women (personified in the case by one Walmart greeter, Betty Dukes, pictured above) suing Walmart for alleged discrimination in pay and promotion. The court sent them home unhappy, ruling unanimously against them on one procedural question and 5-4 on the legal heart of the matter.

Although two statisticians gave evidence that Walmart promoted fewer women than men, and fewer women than its competitors did, the question before the Supreme Court judges was not, in fact, whether the giant retailer discriminated against women. It was whether the women had suffered a single wrong that allowed them to sue Walmart as a block. This required showing that an identifiable policy had had a disparate impact on women. But Walmart's policy actually prohibited sex discrimination, and the company punished those who violated this policy.

This left the employees' lawyers trying to weave several threads into a coherent theory. First, they claimed that a “culture” inimical to women existed. Second, they noted that Walmart's policy was to give local managers broad discretion in hiring decisions. They relied on a sociologist who claimed that these together would make it likely that many individual promotion decisions would go against women.

Justice Antonin Scalia, writing for the conservative majority that sided with Walmart, noted that the sociologist could not put any numerical estimate on what share of decisions went against women because of bias. He would not even be drawn on whether 0.5% or 95% of decisions were determined by bias. This uncertainty was “worlds away” from satisfying the commonality test, wrote Judge Scalia. Whether 0.5% or 95% of women suffered sex discrimination was exactly the issue in certifying a class.

More surprising than the ruling on this question was the 9-0 ruling on another procedural point. The plaintiffs sued under a rule designed to give an entire class “injunctive relief”, ie, an order that the defendant stop bad behaviour. They also asked for back pay under that rule, which they may do only if the back pay is “incidental”. All nine judges agreed that this rule, intended to strike down discriminatory policies, was inappropriate to determine more than a million different pay claims. They said that the women must instead try for class status under a more restrictive rule that requires the issues binding the class not just be common, but that their commonality predominate, alongside other restrictive conditions. The plaintiffs offered a “trial by formula” in which a selection of plaintiffs would have their cases heard, and the results applied to the class. The court ruled unanimously that this would deprive Walmart of defences in individual cases that it was entitled to.

Smaller classesThe effect of the case will not be to kill class-action suits, but probably to trim class sizes. The court has laid down a standard that the commonality of a class cannot be presumed just because all presumptive members feel the same grievance. Some level of proof is needed that a single wrong (say, a biased promotion test) affected them all: a "culture of bias" is not enough. This forces a would-be class to prove part of the merits of their case at the procedural stage, rather than in a full trial. Knowing that the Supremes have raised the bar, this makes it likely that lawyers will tell would-be classes to keep their claims narrow and specific.

The court also trimmed class-action lawsuits in a previous ruling, AT&T v Concepcion (PDF), in April. And today it also ruled 8-0 that five individual power utilities could not be sued (PDF) for the greenhouse gases that contribute to global warming, given the millions of global sources of such gases. Business leaders are sure to cheer this suite of decisions that will slow down what they see as the unjustified use of lawsuits to settle broader social questions.

@Krall fascinating point. In fact, I recommend you contact any company in which you are a shareholder and insist they only hire women. Not only does the evidence show that they are paid less than men, in every case I have seen it also suggests they perform better on average.

Female hedge fund managers, for example, on average beat the market, unlike their male counterparts, while being paid, on average, less. The lesson here is that just because bias is irrational and ridiculous doesn't mean it's not real.

My! My! My! How obsessively litigious, as a society, we have become!! Paranoia, inferiority complex, hallucinations, delusions of persecution & prejudice, self-interest, greed, malice & vindictiveness, jealousy, smarting egoes, political correctness... the pathetic list just goes on & on & on, all contribute insiduously to this culture of litigation, at the mere whisper of a doubt.

I think people are taking the wrong message from this - the Supreme Court was right to rule that these sorts of cases which try to bring individual companies to account for broader social issues are an inappropriate use of class action suits, and of the legal system in general. That doesn't mean they aren't issues to be addressed.

This and the Concepcion case are two of the most important cases the Supreme Court has decided recently.

I've been busy lately and haven't been keeping up with the Dukes case so I didn't realize they were trying to certify as 23(b)(2) instead of 23(b)(3). I recognize the strategy behind that move: no opt-out, notice, predomination, class action superiority requirements. However, I can't imagine the court ever allowing the lawyers to avoid the 23(b)(3) requirements by claiming an injunction + back wages were sought instead of just damages (all class actions for damages must meet 23(b)(3) requirements).

I don't think the unanimous decision against this procedural maneuvering is all that surprising. The court seems loathe to allow class action lawyers to try to funnel a massive case through the class action system while bypassing some of the most important procedural requirements. 23(b)(2) was not supposed to be a way for lawyers to creatively characterize cases for damages as cases for injunctions just so they can avoid the difficulties of certification and the costs associated with letting individual class members opt out as well as notifying all of them of their class status.

Begin Biased Personal Opinion (at least officially):

Really, the attempt to create a super-class including 1.5 million people and force the case through 23(b)(2) seems a bit like greed to me. Splitting the class into subclasses seems much more appropriate, and the attempted super-class might have just been a strategic move designed to skew settlement dynamics even farther in favor of class action plaintiffs and, more importantly, their lawyers. Class action fee structure must be reformed if it is going to remain a viable form of litigation in the modern commercial world.

Class actions are certainly important for keeping companies from forcing individual consumers to accept small monetary losses due to the high cost of individual litigation. However, in situations involving something like employment discrimination where each individual plaintiff's situation is unique and their claim is more valuable, I'm not sure class action is the answer.

Problems might arise if the court used Concepcion logic to allow class-waiver in arbitration agreements in employment contracts. To be honest, that is sort of where I see things going, and it's a bit troubling. (I'm actually a little out of the loop, being abroad at the moment, this hasn't already been litigated has it?)

Pretty sad to log onto a site such as this, a decade into the 21st century, and half the comments to this article are making broad statements to the effect that men deserve to make more than women because they can lift more over their heads and don't have periods.

I already gave the explanation for why being hired at the same at the same location time means nothing. Men are more willing to work dangerous jobs, work outside, commute and relocate farther away, travel, work more hours during the day/week, work more weeks during the year, and put in more work experience to further their careers. As I wrote before, men are also more likely to work full-time, and are less likely to leave work early or call in sick. Sounds reasonable that they’d end up making more money, doesn’t it?

Like it or not, these sorts of things lead to higher wages for men in the long run, even if they were hired at the same times in the same locations as women. The workers most profitable to a company will get the most money, and men clearly are the overall most profitable workers at Walmart both on work- and hour-based raise work plans.

So only if the same number of hours were worked in the same departments (i.e. auto) in the same stores would you have a case for discrimination. If, however, women account for the vast majority of unskilled positions (including men’s underwear) and do not put in the same amount of work for the company, we can’t blame Walmart for the get-rich-quick schemes of the lazy wage-fix-demanding socialists.

By the way, never married women with no children earn 108 percent of what men earn working the same jobs and the same hours! Whether you are a man or woman, your employer is not the one responsible for your poor work ethic.

So this is what passes for a case the Supreme Court needs to adjudicate? I'm no lawyer, but it seems to me a basic common sense test would suggest that the supposed experiences of a couple women (and the sniff test doesn't lend me to believe those are earnest either) can't be extrapolated to an organization with a million employees. What a tremendous bit of lawyer profiteering wrapped in disingenuous female emotionalism.

The issue here seemed to be that Wal-Mart has a non-discrimination policy, and since the managers are in almost complete control of pay raises, you can't connect managers from one store to another as a single policy of Wal-Mart's.

But that doesn't mean discrimination wasn't taking place. As Ginsburg wrote: The plaintiffs’ “largely uncontested descriptive statistics” also show that women working in the company’s stores “are paid less than men in every region” and “that the salary gap widens over time even for men and women hired into the same jobs at the same time.”
...
Finally, the plaintiffs presented an expert’s appraisal to show that the pay and promotions disparities at Wal-Mart “can be explained only by gender discrimination and not by . . . neutral variables.” 222 F. R. D., at 155. Using regression analyses, their expert, Richard Drogin, controlled for factors including, inter alia, job performance, length of time with the company, and the store where an employee worked. Id., at 159.5 The results, the District Court found, were sufficient to raise an “inference of discrimination.”

Also, Krall, really classy of you to go with the "that time of the month" excuse.

2 points of clarification: 1, in the article, the Court didn't decide that states couldn't sue for climate change period, they just (unanimously) said they couldn't do it under public nuisance common-law claims. The Court said the EPA is going to issue it's own ruling, and that is the proper place for this regulation at the moment.

Second, in the comments, there's a lot of talk about the pay disparity between men and women. What most people don't get is those stats rely on total earnings divided against workable years. So if a woman is earning $100k a year for 20 years, then takes 5 years off to raise her kids, the stats see her as earning $0 for those 5 years. The disparity is much smaller when child-rearing years are removed from the equation.

There is really not much to be surprised about, I have been wonder what argument the plaintiffs can bring forward to justify this as a class action case, statistics can't be used in lawsuits like this.

Wow this picture is like the proverbial poster of today's America - fat, dumb and stagnant, while other countries keep progressing rapidly. It's like America is stuck in a Groundhog Day of cheap-oil-fueled and $50-an-hour-assembly-line prosperity of the 1980s

I find it interesting that this group is full of people making mostly political claims.

I have no doubt in my mind that there is some discrimination in this group. With a sample this huge, there's no way that there isn't. But therein lies the problem that SCOTUS seems to have made its judgment. There was no link showing that there was a common cause for the grievances of this group. Therefore, a class suit deprived Walmart of the chance to make individual defenses that it was entitled to.

However, I would like to address claims here. Yes, women-run hedge funds, on average, outperformed the market, but that's because it's a restricted and highly competitive group. The women who get here are all on top already. It's self selected.

However, women do not all make less "because they're less productive." Some are, yes, and on average, women work 9% fewer hours. But you cannot deny that a sex bias sometimes exists. One of my friends' mothers was an architect who designed her firm's most successful airport to date, as well as various other projects. She did not receive a wage for her impressive accomplishment, and has been superseded by lesser men. Her company, to be sure, is biased. Many other ones are; do not ignore it.